WTI and Brent plunge over 2% on report of Saudi push for more oil production

Crude oil prices are continuing their slide, on course to end the week with a loss that reversed two weeks of gains.

The downturn, which began on Wednesday and extended into Friday, has been exacerbated by reports that OPEC+ is actively considering another production boost to reclaim market share.

At the time of writing, West Texas Intermediate is down 2.16% at $62.07 per barrel, while Brent crude is down 2.05% at $65.62 per barrel.

Reuters reported on Wednesday that OPEC+ was considering another monthly output boost to be discussed at the group’s meeting this weekend. That report, citing unnamed sources in the know, started the latest oil price drop, even though the Reuters sources also said OPEC+ may decide to keep production flat on this month in October and that no final decision had been made.

The price drop, however, was inevitable in a context of repeated warnings about a looming oil glut. Even if OPEC+ decides to keep production flat, prices may fall further because of that perception of excessive supply and weak demand.

ING commodity analysts expect just that: OPEC+ keeping production unchanged. I a note earlier this week, they wrote that “This follows OPEC+ unwinding its 2.2m b/d of additional voluntary supply cuts over the last 6 months. The scale of the surplus through next year means it’s unlikely the group will bring additional supply onto the market. The bigger risk is OPEC+ deciding to reinstate supply cuts, given concerns about a surplus.”

Saxo Bank’s Ole Hansen noted that OPEC+ has so far this year approved production increases totaling 2.5 million barrels daily, including the UAE’s production quota increase, but that supply disruption risk remained, essentially putting a floor under prices. Hansen sees oil range-bound for the foreseeable future as a price rally would sap demand from China, while supply from OPEC+ still retains some restrictions, especially supply from Iraq and Kazakhstan, which are being made to compensate for producing above their respective quotas for months.